Wednesday, 6 August 2008

Red Letter Days still in the Red

Last week was a painful anniversary for me - 1 August 2005 was the date my first company Red Letter Days went into administration, 16 years after I founded it.

An administration which could have been avoided had I managed to raise £2million in equity to match a bank finance offer from HBOS of £2million before I ran out of time. The company of course already had £3.3million cash at bank (most of it held in bond by Barclays which they wouldn't let us touch) so the additional injection would have given it the liquidity it needed to trade through, correct its various problems and then float on AIM.

Interesting therefore to see the latest accounts of the new Red Letter Days just filed - which show a £2.8million loss to 30 September 2007 - that's cumulative losses of nearly £10million (£13million if you exclude the £3million handed to the new owners on a plate by Barclays) since the company was acquired out of administration for the 'bargain' price of £250k.

Losses which are, of course, still being blamed on the old company, despite the fact that most of the old company's vouchers expired on 31 July 2005 and those remaining in retail all expired well before the end of the previous accounting period.

The sad fact is that pushing an ailing company through an administration process is a really tempting trap. The thinking goes: wipe the debt, take the brand and everyone's a winner - except of course the old owners.

The reality is that the administration process DESTROYS huge amounts of value.

In Red Letter Days' case, as a result of the high profile media fallout the brand was severely damaged, it caused a run on voucher claims - which the voucher owners would probably have forgotten about if the crash hadn't been so high profile - and the majority of the suppliers had to be paid out anyway because there is a finite number of experience suppliers in the UK, and these suppliers refused to honour any new bookings unless all old debts were paid.

Think how much cheaper it would have been for the new owners just to have injected the £2million equity required (which, under the circumstances, would have secured a massive equity stake), let the company recover and then sell it on a year or two later at a massive premium (our Brokers predicted, given the profile of the brand, that the float value would have been c£25million).

But then sometimes greed just gets the better of people.

An expensive mistake to make!

And a reason why I urge the government to review the current administration and insolvency laws - which often act against the growth of UK enterprise.

52 comments:

Anonymous said...

I am curious as to why you where not allowed to retrieve the 2 million held by Barclays if it meant saving the company, that would have saved a lot of grief for everyone, wouldn't it? And why have the present owners not injected the cash needed, being that they are supposedly great entreprenuers, all seems very strange to me. But then hey, what do I know about such business!! Perhaps there is more to it, and that does not suggest anything derogatory to you Rachel. I am just a cynical B!


The DLOG

Rachel Elnaugh said...

Hey DLOG you will have to write to John Varley and ask him that one! All part of Barclays being the #1 enemy of British Business I guess...

Anonymous said...

From that comment I assume you agree with me!

PS You didn't visit my blog yet, it would be nice to know it is working properly!!

TheDLOG

Anonymous said...

Oh by the way, I doubt very much that he would answer any way, why would one admit to conspiracy!!

TheDLOG

Company Rescue said...

Administration can often rape the business owners and leave creditors empty handed. A company voluntary arrangement is by far the best way to maximise ALL parties' interests if new money is not available.

By reducing costs, removing employees, killing unwanted leases and HP contracts, a company can often survive and live to fight another day.

Pity then that, in England & Wales in 2007 only 399 companies were rescued that way whilst (although a low level historically) liquidation, receivership and administrations were 15,535: yes only 2.5% of insolvent companies were rescued!

In Scotland there were only 6 rescues in 2007. 93% were knocked over by liquidation or receivership!

Almost every insolvency person will push unsuspecting directors in the direction of large fees. That greed is what needs changing not the insolvency legislation.

Keith

Stephen said...

Rachel, many people understand your pain. Whilst they may not have reached your heights - they have less left over to recover with, than you. You at least are famous (or infamous in some circles). Many have absolutely nothing left.

The way to recover is not to keep giving out to others or going over old ground, but to draw in your resources and quietly set about using mind and hands in an independent way to sow new seeds and too grow again. Its kind of like going back to the start again, which really hurts the ego - but for me - was the only place to get too - in order to begin again.

Reputation and fame and all those things are worth nothing at all, if you are not happy in yourself.

I believe the "spoiled soul" can only be replenished by undertaking the right work - and for you - this is about engineering new exciting brands. So go do it!

RLD is history and unless 2012 Olympics rescues it.... It really is history. Not your problem now!

Anonymous said...

Rachel, you're breathtaking inability to see yourself as others do, continues apace. August 1, 2005, must have been a terribly sad day for you, sure. But it was also a life-changing day for those to whom you owed money, and had been strung along for months on your lies and empty promises of imminent payment.

You failed to raise equity because the company had issued thousands of experience vouchers that couldn't be traced. And the millions in the bank was cash from experiences yet to be taken - no bank in its right mind would extend itself based on your "maybe, maybe not" income flow.

Also, your staggering lack of grace in constantly crowing about Red Letter Days' new owners and their business demonstrates your inability to admit your own failures. This is a particularly unattractive quality in business. Indeed, in life too.

Red Letter days continues to suffer because of the parlous state it was left in by you. Not your team. You. You were in charge and knew everything that was going on. You were responsible for the destruction of the brand. What the Dragons did was to save jobs at the time. But of course, that shows them in too good a light for you...

Anonymous said...

Anomynous, I find some of your comments quite rude, I can only assume that you not know Rachel, why should she not be allowed to comment on what was, she made a mistake, don't we all, at least she has learn't something, "experience". She is now full of wonderful motivation and inspiration to others becuase she has had first hand experience!!

TheDLOG

Rachel Elnaugh said...

The point I was trying to make was that pushing a company through an administration process destroys huge value. As Doug (Richard) pointed out in our recent evidence to Parliament, had there been a Chapter 11 provision in UK law the company could have traded through to find a solution.

Anonymous, as I am sure you are connected with RLD, you will know from the most recent Mintel report that the failure of RLD damaged the ENTIRE sector - gift buyers who had previously opted for 'experiences' reverted back to Sony and Gucci and Tiffany and other expensive (and mainly imported) high value gifts.

The Experience Sector (which RLD created) generated many many £millions for its suppliers over the 16 years it traded and would have continued to be far healthier now had the market leader not failed. Suppliers which were also mainly UK based by the way, so encouraging UK business rather than imports.

So the question is, if we are to encourage enterprise in the UK, it's not just about how we encourage new start ups, it is how we protect value destruction by encouraging the survival of businesses wherever possible.

So yes, administration may save jobs in the short term, but in my view it also destroys huge value.

Bradley Chapman said...

Rachel I am not anonymous nor cynical and i do possess one thing "A reasonable Broad Business Experience"

I do have a great experience of opening and operating merchant service processing accounts both in the UK and globally including a full understanding of the massive rolling reserve restrictions held by the processor and the knock on effect that merchant processors can impact upon a businesses cash flow, which unfortunately can bring even the largest of businesses crashing down.

If you have not operated such accounts then your understanding of rolling reserves will be extremely limited and yes of course may lend any individual toward being cynical.

In your post you talked about the pain of the anniversary.. I hear you and i definately feel you!

You also talked openly about the cash injection needed and yes i feel as you do that the business would have been saved along with the brand and profits would have returned.

I have absolutely no doubt that Red Letter Days would be ten times the business today should you have still been running it...but then again your not and yes it was bought for a bargain bucket fee and if the new owners cannot turn a profit from what they picked up then it just goes to show - the success of the business was all yours and no one can ever take that away.

I understand how painful the loss that is felt after running a business for such length of time. It's like loosing a child - It dam well hurts.

I don't know where you find your strength but you do and every day you work your socks of until the wee hours.

Unless you've experienced it you don't know quite what it's like.

Unless you have the courage to share your pains as well as your success - get off the bus

Carpe Diem Rachel Carpe Diem!

Stephen said...

Rachel, you see business from a sensitive, passionate womans perspective. Thats why you can build seriously exciting brands for the entertainment and experiences market sector.

My personal view is that it is people like you that built Google and Microsoft and Yahoo.

Don't grieve over your baby RLD. They took it and spoiled it already.

Stop fiddling around in the undergrowth... Someone out there needs a seriously smart CEO - like you...

Bradley Chapman said...

Oh and Rachel i just wanted to say that the work you are doing for small business owners is amazing.

I have been through my own personal pains but have picked myself up and i too and trying to help prevent others business owners like myself from making mistakes...

If we all stand together and each contribute some positive action for "Business Britain" we can help shape the future and give hope to Entrepreneurs that if they take risks, which we do every day that there may be some protection to stop exactly what happened to RLD...

I have nothing but id give you my last breath if it meant we could help our children have better lives with the knowledge and blessing that its ok to be Enterprising but if you fail then dust your knees down, get back up again and try again..

Why are we wasting time allowing bitter souls to live in the past..

We learn, We move on, we apply

I don't know about any body else who is blogging on Rachel's blog but i would like to take yesterday lesson and make them tomorrows successes

Any one else with me?

Regards and Best wishes
Bradley

Bradley Chapman said...

Stephen i need a smart CEO just like Rachel and so do many other SME businesses that not only need to survive but also need to grow..

Well said Stephen...

Strength in Numbers!

Anonymous said...

Bradley, ABSOLUTELY!!

TheDLOG

Stephen said...

Sorry Bradley, but i must disagree. I don't give a damn about other businesses. If they need a nanny, then they shouldn't be in business.

Most of them should never have been set-up in the first place.

I've worked in some of these dumb places in my worklife and in my view the world would be better off without idiots running UK Ltd. Why go to the trouble to protect incompetent managers and incompetent plans.

Its what entrepreneurial is all about. Crash and burn and learn from your mistakes.

I remember a survey some years back that said that only 2% of British senior management would ever make the middle tier in the U.S. I can believe it!

They better grow up quickly...because for some its going to catch up on them soon.

Anonymous said...

Crash and burn. Fine. But don't take people down with you. For heaven's sake stop this "lunch is for wimps" talk and think of the people you affect while you're making your mistakes.

Anonymous said...

To the DLOG - read the feedback

You said: Anomynous (spelling), I find some of your comments quite rude, I can only assume that you not know Rachel, (apart from your basic errors in grammar, I have to point out that I do know Rachel, well) why should she not be allowed to comment on what was, she made a mistake, (but it's the manner of the mistake, the circumstances behind them that you have to analyse)don't we all, at least she has learn't (try a spellcheck)something, "experience" (and the fact that she's turning her failure into hard cash without paying back her debtors). She is now full of wonderful motivation and inspiration to others (she isn't, she's still got an axe to grind about, for example, the new owners of Red Letter Days - how can that viperous commentary be inspirational?) becuase (spelling again) she has had first hand experience!!

DLOG I'd love to see whatever business you're thinking of. It'll be headline news.

Bradley Chapman said...

In any battle there are casualties, it is of course it's inevitable...

I'm so glad to be an Entrepreneur because it allows me to make the decisions in respect of the people i wish work with or for.

I make my decisions as we all do based of commercially viable propositions and if they go wrong i don't cry..I learn from them.

Let me give you an example!

One of my old customers was Capital Radio and they were of course a commercially viable proposition and spent good money with my business.

I was a VIP guest at a Help a London Child awards event held by Capital Radio.. I had George Michael seated on one side and the then young and Inexperienced "Spice Girls" on the other side of the table..

After the awards i was approached by a company that had wiggled their way into Capital Radio uses Chris Tarrants name. I got carried away with a project that they were involved with..

I extended a large amount of credit to this new business recommended by Capital and they went bust owing me a very large sum of money.. That's not the finish.

All my business at the time was non recourse factored and fully insured, my then bank at the time wriggled out of contract and i did not have the money to fight them... combine that with the Far East crash and it ended up costing me in excess of £500,000..

I did not weep or cry, why?

I made the decision to trade and i accept the risk that comes with it.. So i think you will find do most other business

Risk Versus Reward

Lets all hope that we make more good decision as opposed to bad ones...

If we have then we will have lived a life with no regrets..

I love this stuff... It fires me up and charges my soul.

It's a great blog isn't it....
with great discussions both positive and negative and that's what makes for a decent blog..

Well done everybody.

I have to go now as Ive got a new magazine to get published which is featuring some very interesting and courageous Entrepreneurs!

Carpe Diem

D said...

Well i came to listen to whats been said on here and i can't believe shes still going on about it - after all these years.

Look Rachel. Get real.Why don't you listen to some of the tougher advice people are giving you here and not from people who are just trying to hang on to you.

It is over.. If you think britains entrepreneurs need a florence nightingale to bail them out - then think again.

Even God can't do that now.

D

Anonymous said...

Anonymous, oh you are so clever, reveal yourself, yes I have been one of the lucky ones to have met Rachel, and although I may not be very good at English, I am extremely experienced in the real world, I and my family have seen and been through more than you could probably imagine, so before you start to insult people you don't know THINK FIRST, I actually like Rachel and will support her whatever, even though she would probably never ask, as she is strong, courageous and clever enough to fihgt her own battles. Tell you what if you know her so well get my number from her, give me a ring and I will take you to lunch, if you have the guts!!

TheDLOG

Rachel Elnaugh said...

Pretty clear from the comments so far who has had real life experience of building an enterprise, and who are just acolytes of the Jones/Paphitis 'Court' - relying on their monthly wage packet and who've probably never even run their own bath - let alone their own business !!!

Bradley Chapman said...

What the hell is going on.... There a few people that are obviously very jealous of you Rachel... that being said it is of course a compliment to you..

Florence Nightingale you are not, what you are is a business person that wishes to help businesses overcome or steer around adversity resulting in less business casualties and failures.

I support that and you know how many other businesses support that.

I know that the new project you are working is being kept under wraps but why cant you just let the cat out the bag and we all can have some serious fun with the cynics and the critics..

That being said loose lips sink ships. So hush for now..

Rachel can i ask you something and it's something that so many of us admire... ???

As a wife, a daughter, a sister and mum of 5 that also runs a business do you feel that the government provides enough start up support for new businesses in the UK and equally do you think that there would be any value in experienced business people running a government funded business awareness course to help aspiring entrepreneurs?

I would love to contribute to the teaching of our younger Entrepreneurs and if we could teach them the basics of business and expose them before they start their business then their SKA "Skill Knowledge and Attitude" could be greatly increased..???

Example

We have a national/ regional website where local business who support Entrepreneurial growth contribute varying skills to a 2 week training course of business basics... cash flow, business planning, P/L marketing, sales , web development, banking, finance etc..

After the course the candidate goes into a business as an assistant to the MD and works for two to three weeks where they can learn about a specific business issues relative to their own aspirations before going live with their own start up..

The MD would pledge to mentor the start up Entrepreneur and receive some kind of tax advantage. He/ She may even invest under the EIS scheme?

Could we save more businesses from failing?

Could we create more successes?

Come on guys lets all think how we can help UK businesses build safely and in numbers..

They say that the true test of man is to resist temptation!

Regards
Bradley

Bradley Chapman said...

Oh Rachel i see... I though that these posters were all genuine posters..

I am sure that a lot of us are..

Stephen i hope that i have not offended you in any way. I seemed to have picked up mixed messages from you but most of your posts seem pro Rachel?

Stephen said...

Bradley, I am pro-Rachel, but i am not necessarily on the same page as her - always!

I favour a harder line where the floundering are aloud to flounder into the abyss and our children are set free from the bonds of the classroom and aloud to flourish amongst the floundering.

Its dig deep and roll up your sleeves time. Setting up support organisations for failing businesses is about as useful (and sincere) as trying to prop up Northern Rock.

Anne Herbert said...

Stephen, I don't believe small business owners are looking for a nanny to wipe their noses and a support organisation would be useful if it were run by independent people who could give impartial advice and not the sort of insolvency practitioners Keith mentions - these people make a lot of money from failing businesses.

As a small business owner, what I would expect is an environment in which to grow my business and the relevant impartial support when the going gets tough.
Of course business owners need to be realistic sometimes by trying to make the right judgement on the future of their companies should things get tough - those who are optimistic will want to keep trying and sometimes their strength and determination will see them through. Sometimes, the business owner will simply want to retrench but live to fight on another day.

Sure there are rogues out there and the last thing you want is for someone to set up one company after another, run it badly and seek protection under some new government legislation - these things have to be policed. Also, not every business fails because it was badly run.

For what it's worth, if we develop a crash and burn attitude - that is all we will ever achieve. That, and being cynical about life.

Anonymous - consider this - owing suppliers and possibly hurting people always happens when a business fails, you can't legislate for that, you can't let it prevent you from moving forward and every supplier takes this risk when the offer credit terms. There are sophisticated ways of credit checking these days - suppliers can limit their risk and tell when a company is in trouble and getting round the table and talking can usually prevent a lot of heartache.

Anne

Rachel Elnaugh said...

Oops, look it's almost 9am!
The 'anonymous' salary earners will be settled into their desks with their first cup of the coffee of the day and back online soon (at someone else's expense of course) with their bitchy follow-up comments!

Anne Herbert said...

Bradley - great attitude. i'm all for the 'strength in numbers'. BTW- did you take Rachel's entrepreneurial test? I'd be interested in knowing how you profiled. My guess is Passionpreneur?

Anne

Anonymous said...

Nah, don't think they at their desks, they probably on the golf course, coporate clay shooting or even to trying fleece some other company then go in and buy them out!! They might even be sunning themselves on their yahts, hope they don't sink otherwise all the fun will go, heehee,

TheDLOG

Anonymous said...

If I were you Rachel I would wish the new owners of RLD all the best with the business and hope that they become successful.

You need to move on. Using this BLOG as a means to vent your continued pain and have your apostles vindicate your vitriol is not good for you or anyone.

Find something that makes you truly happy because it won't be this.

Rachel Elnaugh said...

Hey anonymous,

If every post were about RLD I might agree with you.

But if you actually read my Blog you will see I skit across loads of topical subjects - and also see that my life is also currently very full - and very happy!

Stephen said...

Anne, whilst i understand the sentiment, there is only one way for British businesses to succeed.

They need to become more 'independently confident'.

Confidence is developed from within. It not developed through training courses, lectures, consultants or make money ebooks.

In fact these methods actually destroy confidence, by the fact they create the illusion that to be successful, you need to be dependent on some external force.

No, i think the best thing is for business people to be left alone to find their own way. That way when they do eventually make it - they can say - I really built this thing myself.

Thats what i like about Rachels story - "from kitchen table to £100million business". No one can ever take that away from her, but she must find new content to build upon.

I say, "if she did crap RLD all up in the end - so what?... She built it - so she has the right to tear it down.. And maybe thats what she did... Maybe she just got fed up with the ars*holes around her..
And she subconciously pulled the whole thing down........

Nothing worse, than a woman scorned.

I know where she was, if that is the case.

Anonymous said...

Anonymous, you are a touvlo, I wonder if you know what that is, I would be curious to know!!

TheDLOG

Anonymous said...

Stephen I have to disagree with you. Sometimes people in business need reference points and motivation - you can seek your confidence within, but those of us who have taken the painful and lonely trek made the mistakes etc, are the best ones to show others the possible pitfalls. I am all for Ebooks, motivational courses etc, as sometimes your inner fire still needs tending.

Stephen said...

I understand anonymous. Just, so many people are so bombarded that they lose their way.

In those cases, better to be alone with your thoughts.

Anne Herbert said...

Stephen,
I am not so sure I agree. Even the best athletes have coaches and mentors. It's a bit like saying parents should not bring up their children but leave them to fumble and bumble through life - survival of the smartest and all that.

Truth is children often look to their parents as mentors and many of our beliefs and values are shaped in this way.

Rachel and all the other entrepreneurs will probably tell you they had someone in the background to encourage them when things got a little rough.

I think it's those who feel they have to do it all themselves who feel the pain the hardest when it does not work out.

Anne

PS I think a 3rd 'anonymous' has joined this thread :-)

Stephen said...

Anne, adults are not children. Adults should be who and what they were meant to be. Shaping people will only cause problems and disalussionment for them further downstream.

The only way to enjoy being a millionaire is to do it all yourself.

The most fulfilled millionaires are definately those who had a strong hand in reaching their destiny.

There are too many consultants and spin doctors out there living on a reputation they built up over many years, but when it comes down to it - they couldn't build a significant brand if they were given every chance too.

They are the people preaching to the masses. The so called people with the XFactor. Tested, these people would be shown for what they truly are..

Hasbeens...who have lost touch with who they really are and what they are really worth. These people are no good to anybody - including themselves.

Surround yourself with advisors, but don't listen to any of them. Do what they don't tell you and you will be alright.

Anonymous said...

I do not believe anyone can "do it" on their, we all need advice and support, it is up to the individual who and how they choose the information to be given. We all act like a computer, we gather information, digest it and then come out with, hopefully, a valid solution/answer. Sometimes the best ideas/advice actually comes from children, I have actually experienced at a skills day for 14/15year olds. It is quite amazing how some of them think, you can actually pick out the leaders when they work in groups. Perhaps we need more people like Rachel to go into schools, as scouts, to find our future entrepreneurs, there are many of them out there, they just need to be found and mentored, a bit like football scouts. I hope this sort of makes sense as I have been told my Grammer and English is not very good!!!

TheDLOG

Stephen said...

The Dlog, Do you think Rachel would be talking on this blog if she didn't care? No. She does care, but the truth is she was meant for greater things.

Many people would say - what greater thing could she do than help british businesses out of myopic poverty or children to become better entrepreneurs.

My view is that improvements will only come from "inspirational leaders" who are actually out there, at the helm of british busines, leading from the front.

She is more than a celebrity, a mother, wife, consultant, author, mentor, speaker, blogger etc etc

She is an ultrapreneur and she should be building the next Google or Coca Cola.

WTF

Anonymous said...

I know she cares, but perhaps you misunderstood me. I would like to see more of the Rachels of this world helping, from the early stages in life, nurture our children from young and we will be a great nation, sometimes it is no good doing it when we are past the 20/30 year mark, the bad would already be set in. My problem is I have very strong views on education and unfortunately not able to put them into words, so please forgive my poor literate skills!!

TheDLOG

Stephen said...

The Dlog, i met a lot of literate millionares and a lot of iliterate ones.

you really can't tell the difference.

Anonymous said...

Stephen, I will take that as a hmm, compliment and a don't worry!!

TheDLOG

Stephen said...

thats it Dlog.. we can all do anything we want. You don't need permission, teachers, MBA's, books or Dragons - or anything else.

"independent confidence". Right down inside you already.

Never be distracted away from it.

Anonymous said...

Thanks for that vote of confidence, but sometimes it can be embarrasing,

TheDLOG

Anonymous said...

" Rachel, you're breathtaking inability to see yourself as others do, continues apace.........What the Dragons did was to save jobs at the time. But of course, that shows them in too good a light for you..."

so so true...

Rachel Elnaugh said...

Anonymouse

Peter and Theo bought the company from administration not through some altruistic desire to save the jobs of people they'd never met, but because they thought they could make some money from the deal. That's the long and short of it!

Anonymous said...

I completely agree with another Anon comment. The reality is that Rachel obviously failed to control the cashflow of her business. She should just admit this, not blame other people, and, make sure that she learns the necessary skills to avoid this happening in the future so that members of the public, and, suppliers, and the Banks Shareholders, do not have to suffer for her lack of knowledge. The latter, by the way is not a 'sin'... but, should just be owned up to. I have been successful for over 40 years, and, one thing I have learned, is not to blame other people for my mistakes.
Anon.

Stephen said...

wow, an anonymous person who has been successful for over 40 years. Wonder what they will be claiming next.

Rachel Elnaugh said...

Anonymouse,

Actually our cashflow was very healthy indeed - we had over £3.3 million of cash at bank!

However, control of the majority of that cash was with Barclays, not with the directors, even though they also held c£1.3million of other security in addition to £3million of cash against their perceived contingent liability. Barclays never gave any legal justification for their action but as you will know, in business, whoever holds possession of the money is in the strongest position.

What can an entrepreneur do if their monies are held away from them in this way? We were left with no alternative but to put the company into administration - to protect it from its creditors, so it could be sold as a going concern - and yes, to ensure at least staff's jobs were also saved.

Had we had use of the cash the company would have survived, it is as simple as that.

12 months after the crash it transpired the actual liability was less than £1.5million - and the directors' position was justified - so who was to blame?

The directors, or Barclays?

Anonymous said...

"The company of course already had £3.3million cash at bank (most of it held in bond by Barclays which they wouldn't let us touch)"

They wouldn't let you touch it because you had not completed a large amount of your sales - which meant that they were potentially exposed to a large amount of refunds. Refunds that *they* would have to provide if you failed to deliver.

The bank faced a significant liability in case your suppliers could not fulfil or even if you went belly-up. In those cases they would have to refund your customers and then attempt to re-charge you, if you were still afloat.

Quite naturally the banks hedged their bets. In the end, they were proved right. They suspected your finances were dodgy and the fact that you tanked is proof positive that they were correct.

No conspiracy here, just sensible business practice. Shame you can't deal with it.

Anonymous said...

Having just re-read this thread, and your posts in particular Rachel, I think Rachel could do well to do an MBA. If that is too much then maybe an economics A-Level. I wish Rachel no ill will but it is striking that she does not seem to understand the basics of how credit card issuers deal with retailers. One wonders if she has any concept of risk management?

That bonded money was *not* your liquid cash - that you have not learned from your failure is saddening tbh.

Rachel Elnaugh said...

We perfectly understood why the bank needed to bond the credit card monies, the question was what level of bonding was acceptable?

At the time the company went into administration Barclays held £4.3 million in security against their perceived contingent liability, including £3million in cash.

12 months after the company went into administration, and after all claims against those credit card issued vouchers had been fulfilled, the total cost of honouring them was less than £1.5 million. Bear in mind the media blare surrounding the collapse would have precipitated a lot of those claims, so if the company had traded through normally I estimate the cost would have been less than £1million.

In other words the company was grossly over-bonded. And what happenend to the extra cash? Did it go to the creditors of the company? No sirree - it was all awarded by Barclays to the new owners of the company, apparently part of the deal that was done with the administrators and the new owners on the evening of 1 August 2005.

Far from Barclays position being confirmed, it was actually the Board's position that was confirmed. Had the company had the use of the cash it was entitled to it would not have been forced into administration.

By the way yes, I do have a Economics A level, as well as a Maths A level as well as 7 years' experience in accountancy plus a professional qualification in taxation...

By the way, given the fact that I was very vocal about the credit card bonding at an event in Cardiff this week, and the fact that my Blog has been carpet-bombed by derogatory 'anonymous' comments this morning, I am beginning to wonder if said 'anonymous' in fact works for the aforementioned bank!

Rachel Elnaugh said...

PS Oops, anonymous - I realise I forgot to mention, Cass Business School has asked me to lecture in Entreprenurship to their Executive MBA students this academic year...